Nigeria’s debt servicing costs rose by 55.71% to N1.24 trillion in just three months.
According to The Punch, data from the Debt Management Office shows that between October and December 2022, Nigeria spent N406.77 billion on servicing domestic debt and N143.74 billion on servicing overseas debt, for a total of N550.51 billion.
However, between January and March 2023, Nigeria spent N874.13 trillion on servicing domestic debt while spending an additional N368.87 trillion (or $801.36 million) on servicing external debt.
The external debt servicing was done using the DMO’s exchange rate of $1=N460.3.
According to a recent report by the International Monetary Fund, the Federal Government expects to spend 82% of its revenue on interest payments in 2023.
The IMF projects that external debt, including private sector debt, will increase to $121.6 billion, while external reserves will increase to $37.5 billion.
This was stated in the document “IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria Summary,” which included a table of forecasts.
According to the forecasts, less money will be utilized by the government to pay interest, with the percentage falling from 96.3% in 2022 to 82.3% in 2023.
In addition, it stated that in 2020 and 2021, respectively, interest payments were 86.1% and 87.8% of the federal government’s revenue.
According to a DMO DG document recently acquired, excessive debt levels frequently result in high debt servicing costs and have an impact on infrastructure investment.
The DMO DG claimed that “high debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy.”
She emphasized the need for debt sustainability in the document, which she defined as the capacity to service all current and future obligations while maintaining the ability to finance policy goals without turning to excessively large adjustments or exceptional financing, like arrears accumulation and debt restructuring, which could otherwise jeopardize the stability of the economy.
According to a report from the Nigerian Economic Summit Group and the Open Society Initiative for West Africa, based on a debt sustainability analysis, Nigeria and 10 other Economic Communities of West African States countries are currently in a debt crisis.
Benin, Burkina Faso, Cabo Verde, Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo are the other ten countries.
The World Bank recently stated that Nigeria’s debt, while potentially manageable for the time being, was risky and expensive.
The nation’s debt runs the risk of becoming unsustainable in the case of macro-fiscal shocks, according to the international financial organization based in Washington.
According to the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, the Nigerian economy has been marked by a number of economic weaknesses, including a growing public debt and debt payment load.
